Crypto Market Adds $29 Billion This Week, Can Momentum be Sustained?
This week, the valuation of the crypto market increased by $29 billion from $100 billion to $129 billion.
Within a five-day span, led by the sudden increase in the Bitcoin price, the crypto market experienced a surge in its valuation by nearly 30 percent.
Following the initial rally of Bitcoin (BTC) to $4,000, many technical analysts expressed concerns toward the sustainability of the recently found momentum of the crypto market, as Bitcoin started to retrace.
Can Crypto Market Sustain Momentum?
A cryptocurrency trader with the online alias “The Crypto Dog” said after the initial corrective rally of Bitcoin that the price trend of the asset has become poor with an immediate pullback to $3,700.
The trader said that if the dominant cryptocurrency struggles to rebound from $3,635 and resistance levels below it, the corrective rally of the crypto market on December 19 may reverse in the short-term.
“I’m astounded with how terrible BTC looks after just two hours. It could not have become more rekt in a shorter amount of time,” noted the trader.
Hsaka, a cryptocurrency technical analyst, said that Bitcoin already dropped to its initial resistance zone and is at risk of falling to the $3,500 region in the days to come.
The analyst said:
To recover from one of the largest sell-offs in recent years, the cryptocurrency market has to demonstrate stability and a gradual increase in value.
A sudden spike in the price of major cryptocurrencies increases the vulnerability of the market to a big drop in value, especially if it is not supported by sufficient volume and trading activity.
As of December 20, the daily trading volume of Bitcoin remains at around $6.6 billion, which is relatively high considering the volume the asset demonstrated throughout the past several weeks.
But, for an asset that recorded an 18 percent surge in price within a four-day span, its volume still remains weak.
If the recent corrective rally is followed up with a consolidation period and a stable few weeks that can provide some basis for the market to climb on top of, a mid-term rally remains a possibility. If the asset class continues to demonstrate such a high level of volatility, then volatility on the downside can also be expected.
Low Volume Assets Already Falling
Stellar (XLM), Cardano (ADA), and other cryptocurrencies with a daily trading volume below $100 million have already started to fall against both the U.S. dollar and Bitcoin.
Depending on the level of volatility showed by major digital assets throughout this week, the market could prevent a downtrend from occurring in the short-term or drop to major resistance levels. The crypto market has shown strength at $100 billion and this week’s corrective rally likely materialized as oversold conditions triggered an abrupt recovery.
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Featured Image from Shutterstock. Charts from TradingView.